Patrick G Felgner and Kristi J Felgner

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AUTHENTICATED /
U.S. GOVERNMENT
INFORMATION

GPO

UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF OHIO

In Re: )
) JUDGE RICHARD L. SPEER
Patrick and Kristi Felgner )
) Case No. 11-32274
Debtor(s) )
)
DECISION AND ORDER

This cause comes before the Court after a Hearing on the Trustee’s Objection to the Debtors’
claim ofa homestead exemption in real property located in the state of Michigan. (Doc. No. 30). The
Trustee’s objection to the Debtors’ claim of exemption is based on a single, uncontroverted fact: At
the time they filed for bankruptcy relief, neither of the Debtors resided in the property against which

they claim a homestead exemption.

At the conclusion of the Hearing held on the Trustee’s objection, the Court afforded the
Parties the opportunity to submit briefs in support of their respective positions. The Parties have
since submitted their respective briefs which this Court has now had the opportunity to review. Based
upon this review, and an analysis of the relevant legal precedent, the Court, for the reasons set forth

herein, finds that the Trustee’s objection to the Debtors’ claim of exemption should be Sustained.
FACTS

On April 22, 2011, the Debtors, Patrick and Kristi Felgner, filed a petition in this Court for

relief under Chapter 7 of the United States Bankruptcy Code. (Doc. No. 1). Ericka Parker was

thereafter appointed as the trustee of the Debtors’ bankruptcy estate.

In filing for bankruptcy relief, the Debtors disclosed an ownership interest in two parcels of

real property: (1) a property located in Toledo, Ohio which the Debtors listed as their residence at

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the time they filed for bankruptcy relief; and (2) a second property located in the state of Michigan.
Citing to Ohio law, O.R.C. § 2329.66(A)(1), the Debtors claimed a homestead exemption in their
Michigan property.

After the meeting of creditors held pursuant to § 341 of the Code, the Trustee filed her
objection to the Debtors’ claim of a homestead exemption in their Michigan property. As the basis
for her objection, the Trustee set forth that the Debtors have listed “their residential address on the
petition as being 1910 Ketner Ave., Toledo, Ohio 43613 and therefore, are not entitled to claim said
exemption in the Michigan real estate due to the fact it is not their residence.” (Doc. No. 14). In
response, the Debtors set forth that they are entitled to claim a homestead exemption in their
Michigan property because it “has been a second residence and will be used as the primary
residence.” (Doc. No. 17). To this end, the Debtors maintain that they are “surrendering the real
estate located at 1910 Ketner, Toledo, Ohio and will be residing solely in the property located at
3656 Oceanbeach, Clark Lake, Michigan.” Jd.

DISCUSSION

Before this Court is the Trustee’s objection to the Debtors’ claim of exemption.
Determinations concerning the allowance of exemptions from property of the estate are deemed to
be core proceedings pursuant to 28 U.S.C. § 157(b)(2)(B). Accordingly, in this matter, this Court has
the jurisdictional authority to enter final orders and judgments. 28 U.S.C. § 157(b)(1).

When a debtor files for bankruptcy relief, all their interests in property become, by operation
of law, property of an estate. 11 U.S.C. § 541(a). In a case proceeding under Chapter 7 of the
Bankruptcy Code, property of the bankruptcy estate is subject to administration by a trustee, who is
statutorily charged with expeditiously collecting, and then reducing to money, property of the estate

for distribution to the debtor’s creditors. 11 U.S.C. § 704(a)(1). A debtor’s claim of exemption serves

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as an exception to this general rule, with the Bankruptcy Code providing that a debtor’s interest in
certain types of property may, notwithstanding its status as estate property, be exempted from the

claims of creditors. 11 U.S.C. § 522(b)/(c).

Exemptions promote a variety of public-policy aims: (1) providing the debtor with that
property which is necessary for their survival; (2) enabling the debtor to rehabilitate themselves; and
(3) protecting the debtor’s family from the adverse effects ofimpoverishment. Jn re Malsch, 400 B.R.
584, 587 (Bankr. N.D.Ohio 2008). For debtors who seek relief under the Bankruptcy Code,
exemptions also further one of the Code’s primary aims: providing the debtor with a fresh-start. Jd.
at 587-88. Based upon their remedial function, exemptions are to be liberally construed in favor of

a debtor. Jn re Bunnell, 322 B.R. 331, 334 (Bankr. N.D.Ohio 2005).

Exemptions, however, are entirely creatures of statute, being in derogation of the
common-law rule that all of a debtor’s property is subject to execution for the payment of the
debtor’s legal obligations. Jn re Wycuff, 332 B.R. 297, 300 (Bankr. N.D.Ohio 2005). A debtor’s
intent to claim property as exempt will thus not be assumed. Instead, a debtor is required to take
some affirmative action — usually by noting the claim of exemption and its statutory authority in
bankruptcy schedule C — to claim property as exempt. /n re Brooks, 227 B.R. 891, 893-94 (Bankr.
W.D.Mo.1998).

The types of exemptions available to debtors in bankruptcy are not uniform and are dependent
on the state in which “the debtor’s domicile has been located for the 730 days immediately preceding
the date of the filing of the petition...” 11 U.S.C. § 522(b). A debtor’s domicile is “established by
physical presence in a place in connection with a certain state of mind concerning one’s intent to
remain there.” Mississippi Band of Choctaw Indians v. Holyfield, 490 U.S. 30, 48, 109 S.Ct. 1597,
1608, 104 L.Ed.2d 29 (1989). A person, although having more than one residence, may only have

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one domicile at a particular time. Williamson v. Osenton, 232 U.S. 619, 34 S.Ct. 442, 58 L.Ed. 758
(1914).

No single factor can conclusively establish domicile. Instead, to determine the domicile of
a debtor, a court must evaluate all of the circumstances of the case. Galva Foundry Co. v. Heiden,
924 F.2d 729 (7" Cir.1991). Among the factors to be considered in evaluating the situs of a debtor’s
domicile are: (1) the location of the current residence; (2) voting registration and voting practices;
(3) location of spouse and family; (4) location of personal or real property; (5) location of brokerage
and bank accounts; (6) memberships in churches, clubs, unions and other organizations; (7) location
of a person's physician, lawyer, accountant, dentist and stockbroker; (8) place of employment or
business; (9) driver’s license and automobile registration; and (10) payment of taxes. District of

Columbia v. Murphy, 314 U.S. 441, 455-58, 62 S.Ct. 303, 309-11, 86 L.Ed. 329 (1941).

Based upon these considerations, the state of Ohio necessarily constitutes the Debtors’
domicile. The Debtors both filed for bankruptcy in Ohio, and both listed in their bankruptcy petition
an Ohio address as their residence. The Debtors also related to the Court that they both vote in Ohio.
Finally, according to the uncontested information submitted by the Trustee, both of the Debtors

presently maintain Ohio driver’s licenses and enroll their children in Ohio schools. (Doc. No. 35).

For individuals domiciled in Ohio, the right to exempt property in bankruptcy is determined
by Ohio law as well as nonbankruptcy federal law. 11 U.S.C. § 522(b); O.R.C. § 2329.662. In this
matter, the Debtors cite to § 2329.66(A)(1)(b) of the Ohio Revised Code as the basis for their claim

of an exemption in their Michigan property. This provision provides:

(A) Every person who is domiciled in this state may hold property exempt
from execution, garnishment, attachment, or sale to satisfy a judgment or
order, as follows:

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(b) In the case of all other judgments and orders, the person’s interest,

not to exceed twenty thousand two hundred dollars, in one parcel or

item of real or personal property that the person or a dependent of the

person uses as a residence.
When interpreting this provision, this Court must apply the law as interpreted by the state’s highest
court or, if there is no decision on point, how the Court believes the state’s highest court would
interpret the statute. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); In
re Alam, 359 B.R. 142, 148 (B.A.P. 6" Cir. 2008). This Court is to also afford deference to relevant

rulings of other courts of the state. Jd.

As applied to § 2329.66(A)(1)(b), the dispute between the Parties centers on the provision’s
requirement that a homestead exemption may only be claimed in property if the “person uses [it] as
a residence.” It is the Debtors’ position in this regard that, notwithstanding Ohio being their
domiciliary, they “use” their Michigan property as their residence because they “have shown an
intent to live in the real estate in the future.” (Doc. No. 34). The Trustee contends, however, that the
Debtors do not “use” their Michigan property as a residence because “although they may intend to
move after the banrkuptcy [sic] to MI, the exemptions are applied based upon the date of the
bankruptcy filing.” (Doc. No. 35).

The term “uses,” as contained in § 2329.66(A)(1)(b), equates with occupancy. That is, for
property to be used as a residence within the meaning of § 2329.66(A)(1)(b), the property must be
occupied and used as a home. Jn re Kimble. 344 B.R. 546, 555 (Bankr. S.D.Ohio 2006), citing Staley
v. Woolley, 4 Ohio Cir. Dec. 550, 1893 WL 297, *2 (1893); In re Lusiak, 247 B.R. 699, 702 (Bankr.
N.D.Ohio 2000). As set forth by the Ohio Supreme Court:

The term ‘homestead’ therefore contemplates occupancy as a dwelling place,
and therefore in order to hold a dwelling place as a ‘homestead’ it must at
some time have been occupied as a home by one who claims the benefit of the
exemption.

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Mut. Bldg. & Invest. Co. v. Efros, 152 Ohio St. 369, 373, 40 0.0. 389, 89 N.E.2d 648, 650 (1949)
(interpreting Ohio’s prior exemption statute, Section 1 1663-1 of the General Code).

As is the situation with a person’s domicile, the determination of a debtor’s right to exempt
property is assessed as of the date the debtor files for bankruptcy relief. In re Wengerd, 453 B.R. 243,
250 (6" Cir. B.A.P. 2011), citing White v. Stump, 266 U.S. 310, 45 S.Ct. 103, 69 L.Ed. 301 (1924).
Consequently, the time at which a debtor files for bankruptcy relief determines whether the debtor
occupies their property as a home, and thus whether the property is used as a residence so as to
qualify it for an exemption under § 2329.66(A)(1)(b). However, unlike alluded to by the Trustee,
physical occupancy by a debtor of their residence on the date a petition is filed is not an absolute

prerequisite to a proper claim of a homestead exemption under § 2329.66(A)(1)(b).

Instead, in applying Ohio legal precedent,’ this Court has recognized that a debtor can qualify
for a homestead exemption under § 2329.66(A)(1)(b) if, on the date the petition is filed, they
constructively occupy their residence. In more detail, this Court, in case of Jn re Cameron, set forth
that an interpretation of Ohio law “presents the legal proposition that in liberally construing the
exemption statute in a light most favorable to the Debtors, the Court should recognize a constructive
occupancy.” 25 B.R. 119, 120 (Bankr. N.D.Ohio 1982). The circumstances at issue in Jn re Cameron
involved debtors who, at the time they filed for bankruptcy relief, had been displaced from their
residence because of a fire, but who intended to return to their residence once the fire damage had

been repaired.

The concept of constructive occupancy, however, is limited in its breadth. Specifically, as

was the situation presented to this Court in In re Cameron, constructive occupancy has been

]

Matter of Cottingim, 7 B.R. 56 (Bankr. S.D.Ohio 1980), and Mutual Building and Investment
Co. v. Efros, 152 Ohio St. 369, 40 Ohio Ops. 389, 89 N.E.2d 648 (1949).

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generally confined under Ohio law to those situations involving a debtor’s claim of a homestead in
property where, although left temporarily unoccupied, the debtor lacks the intent to permanently
abandon the property. See Jn re Wengerd, 453 B.R. at 248, citing Jackson v. Reid, 32 Ohio St. 443
(Ohio 1877) (despite debtor’s temporary absence from homestead, exemption was allowed because
evidence showed no intention to permanently abandon); Weitz v. Beard, 12 Ohio St. 431 (Ohio 1861)
(exemption allowed where temporary removal without intent to abandon homestead); Meadow Wind
Health Care Ctr. v. McInnes, 2000 WL 1055938 (Ohio Ct.App. July 24, 2000) (temporary removal
with no intent to abandon insufficient to deny exemption; for exemption purposes, abandonment

consists of both actually leaving and intent to abandon).

At the same time, Ohio law is also clear regarding property that has never been used or

occupied as a primary residence. In Mutual Bldg. & Inv. Co. v. Efros, the Ohio Supreme Court held:

Premises that have not been occupied as a home or dwelling place have not
been impressed with the character of a homestead and can not be claimed as
such. To constitute a homestead under the statute there must be residence,
actual or constructive.

Mere intention to occupy premises as a home at some future time without
residence or occupancy is insufficient to establish a homestead.

Where premises have never been used or occupied as a homestead the right
thereto can not be acquired by a mere intention to use them as such at some
indefinite future time.
152 Ohio St. 369, 373-74, 89 N.E.2d 648, 651 (Ohio 1949) (internal citations omitted). A homestead,

therefore, cannot be impressed upon a property that was never used as a primary residence.

In this case, there is no evidence that the Debtors ever occupied their Michigan property as
a homestead. To the contrary, the evidence shows that the Debtors’ domicile has been maintained
at their Ohio property, with their Michigan property being used simply as a vacation home.

Accordingly, based on the binding precedent set forth in Mutual Building and Investment Co. v.

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Efros, the Debtors’ intent to occupy their Michigan property at some point in the future is insufficient
to establish the property as a residence for purposes of § 2329.66(A)(1)(b). This conclusion is further
supported by the recent decision rendered by the Bankruptcy Appellate Panel for the Sixth Circuit
in In re Wengerd, 453 B.R. 243, 250 (6" Cir. B.A.P. 2011).

In In re Wengerd, the question before the court was whether debtors who, at the time they
filed for bankruptcy relief, had used, and were currently using, a home for a principal residence must
also intend to occupy the residence in the future to claim a homestead exemption. /d. at 247. This
question arose on account of the trustee’s objection to the debtors’ claim of an exemption in their
residence where the debtors had entered into a prepetition contract to sell their home, but had not yet
vacated the home at the time of their bankruptcy. After conducting an extensive analysis of case law
addressing the issue of occupancy and intent, the court in Jn re Wengerd held that “the Debtors’
intention to leave their property post-petition is irrelevant and does not defeat their claim to the
homestead exemption provided by Ohio Rev.Code § 2329.66(A)(1).” Jd. at 252. In coming to this
decision, the court in Jn re Wengerd cited with favor this Court’s decision in Jn re Cope, 80 B.R. 426

(Bankr. N.D.Ohio 1987).

In Jn re Cope, the debtor claimed a homestead exemption in a property he owned and in
which he had resided for a number of years. At the time he filed for bankruptcy relief, the property
was used by the debtor as a residence. However, just three days after filing his petition, the debtor
abandoned his homestead by moving to another property. Under these circumstances, the trustee
objected to the debtor’s claim of a homestead exemption. However, like in /n re Wengerd, this Court
dismissed the trustee’s objection, finding that when a debtor’s residence has been established, it

continues until the property is actually abandoned. /d. at 428.

These decisions, thus, show that when determining a debtor’s homestead for exemption

purposes, the location of a debtor’s residence is fixed at the time the bankruptcy case is filed; a

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debtor’s future intent to abandon their homestead is not considered. Accordingly, in this case, the
Debtors’ future intent to establish a new residence cannot be used to create a homestead exemption
in a property which did not constitute their primary residence at the time they filed for bankruptcy

relief.

In conclusion, the Court finds that, based upon applicable legal precedent, a debtor’s
intention to occupy a property as a homestead at some point in the future does not give rise to an
exemption under § 2329.66(A)(1)(b). Instead, to claim a homestead exemption under
§ 2329.66(A)(1)(b), a debtor must occupy, whether actually or constructively, the property at the time
the bankruptcy case is filed. Consequently, as their Michigan property was not occupied at the time

their bankruptcy case was filed, the Debtors are not entitled to claim an exemption in the property.

In reaching the conclusions found herein, the Court has considered all of the evidence,
exhibits and arguments of counsel, regardless of whether or not they are specifically referred to in

this Decision.
Accordingly, it is

ORDERED that the Trustee’s Objection to the Debtors’ claim of a homestead exemption
under Ohio Revised Code § 2329.66(A)(1), be, and is hereby, SUSTAINED.

Dated: October 24, 2011

JML fie

WA RiGrard L. Speer
United States
Bankruptcy Judge

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CERTIFICATE OF SERVICE

Copies were mailed this 24th day of October, 2011 to:

Chase Auto Finance
201 N. Central Ave Floor 11
Phoenix, AZ 85004

Kristi J Felgner
1910 Ketner Ave
Toledo, OH 43613

Patrick G Felgner
1910 Ketner Ave
Toledo, OH 43613

Abbey M. Flynn
425 Jefferson Ave Suite 910
Toledo, OH 43604

Ericka S Parker
232 10th Street
Toledo, OH 43604

Steven Lee Smith
41 S. High Street Suite 2400
Columbus, OH 43215

/s/ Jennifer Huff
Deputy Clerk, U.S. Bankruptcy Court

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